Why Nationstar’s Shares Sank

Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mortgage servicer Nationstar Mortgage Holdings(NYSE:NSM) fell as much as 10% today after missing estimates on earnings per share for its most recent quarter. This comes on the heels of reports that paint a picture of fierce competition in the mortgage-servicing industry for valuable mortgage-servicing portfolios.

So what: Nationstar's EPS, at $0.61, is significantly better than the $0.04 EPS loss in the year-ago quarter. Without one-time drags on the bottom line, Nationstar had $0.64 in adjusted EPS, still a penny below what analysts had expected. Revenue, at $277.2 million, was better than the consensus estimate of $268.9 million.

Nationstar has been in competition for several large mortgage-servicing portfolios, and it missed out on acquiring MetLife's (NYSE:MET) portfolio, which was sold to JPMorgan Chase(NYSE:JPM) yesterday. That hurt Nationstar, as did an earlier loss of Ally Financial's Residential Capital servicing business, which Ocwen Financial(NYSE:OCN) won after an intense bidding process.

Now what: Nationstar CEO Jay Bray remains confident that the company can achieve significant organic growth, and the tripling in revenue from the year-ago quarter attests to that possibility. However, Nationstar's loss of multiple large acquisition opportunities also points to threats on the horizon, as organic growth may run up against a wall of consolidation. The successful acquisition of a large mortgage-servicing portfolio may be the most important near-term action Nationstar can take to reverse its recent slide.

Author

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.